At Pete Peterson's Fiscal Summit, that big bipartisan wet kiss to the plutocratic class, Bill Clinton was asked about how to address growing inequality. His response:
"I don’t think there’s much you can do about that unless you want to start jailing people."That's an interesting take, Bill. It's fitting that someone responsible for the expansion of the police state would immediately think of jails as a solution to a problem.
Prosecuting the bankers responsible for the financial crisis would be great, but let's put that discussion on hold for a second. Rather, here are a few things you could have done--or should I say, not done--as president to address the issue.
Bill, you signed the North Atlantic Free Trade Act (NAFTA) into law 20 years ago. You said it would accomplish many great things, even world peace. Yep, that's right: you promised world peace.
NAFTA has had an effect on inequality, Bill. It's made it worse.
Earlier this year, Public Citizen took a look at NAFTA's 20-year legacy. It isn't pretty.
• Rather than creating the promised 170,000 jobs per year, NAFTA has contributed to an enormous new U.S. trade deficit with Mexico and Canada, which had already equated to an estimated net loss of one million U.S. jobs by 2004. This figure, calculated by the Economic Policy Institute, includes the net balance between jobs created and jobs lost. Much of the job erosion stems from the decisions of U.S. firms to embrace NAFTA’s new foreign investor privileges and relocate production to Mexico to take advantage of its lower wages and weaker environmental standards. The NAFTA-spurred job loss has not abated during NAFTA’s second decade, as the burgeoning post-NAFTA U.S. trade deficit with Canada and Mexico has not declined.You could have avoided exacerbating the problem by not signing NAFTA. I'm not talking about creative or tried-and-true measures for reducing inequality. I'm just talking about not actively making it worse.
• More than 845,000 specific U.S. workers have been certified for Trade Adjustment Assistance (TAA) as having lost their jobs due to imports from Canada and Mexico or the relocation of factories to those countries. The TAA program is quite narrow, only covering a subset of the jobs lost at manufacturing facilities, and is difficult to qualify for. Thus, the NAFTA TAA numbers significantly undercount NAFTA job loss.
• NAFTA has contributed to downward pressure on U.S. wages and growing income inequality. According to the U.S. Bureau of Labor Statistics, two out of every three displaced manufacturing workers who were rehired in 2012 experienced a wage reduction, most of them taking a pay cut of greater than 20 percent. As increasing numbers of workers displaced from manufacturing jobs have joined the glut of workers competing for non-offshorable, low-skill jobs in sectors such as hospitality and food service, real wages have also fallen in these sectors under NAFTA. The resulting downward pressure on middle-class wages has fueled recent growth in income inequality.
• Despite a 188 percent rise in food imports from Canada and Mexico under NAFTA, the average nominal price of food in the United States has jumped 65 percent since the deal went into effect. This is the opposite of the outcome promised when NAFTA passage was debated. Then, some NAFTA proponents acknowledged that the deal would cause the loss of some U.S. jobs, but argued that U.S. workers would win overall by being able to purchase cheaper imported goods.
• The reductions in consumer goods prices that have materialized have not been sufficient to offset the losses to wages under NAFTA. U.S. workers without college degrees (63 percent of the workforce) have likely lost an amount equal to 12.2 percent of their wages under NAFTA-style trade even after accounting for the benefits of cheaper goods. This net loss, calculated by the Center for Economic and Policy Research, means a loss of more than $3,300 per year for a worker earning the median annual wage of $27,500.
• Soon after NAFTA’s passage, the small pre-NAFTA U.S. trade surplus with Mexico turned into a massive new trade deficit and the pre-NAFTA U.S. trade deficit with Canada expanded greatly. The inflation-adjusted U.S. trade surplus with Mexico of $2.5 billion and the $29.1 billion deficit with Canada in the year before NAFTA have morphed into a combined NAFTA trade deficit of $181 billion. The rosy job-creation promises made at the time of the NAFTA votes were predicated on NAFTA improving the U.S. balance of trade. The reality has been the opposite.
• During the NAFTA debate, scores of U.S. corporations promised to create specific numbers of jobs if NAFTA passed. Public Citizen catalogued these pledges, the failure to meet them and even the record of the same firms’ relocation of jobs to Mexico and Canada in a comprehensive report.
• The average annual U.S. agricultural trade deficit with Mexico and Canada under NAFTA stands at $800 million, more than twice the pre-NAFTA level. U.S. food processors moved to Mexico to take advantage of low wages and food imports soared. U.S. beef imports from Mexico and Canada, for example, have risen 130 percent since NAFTA took effect, and today U.S. consumption of “NAFTA” beef tops $1.3 billion annually.
Bil, you gave yourself a nice pat on the back for ending "welfare as we know it" with the Personal Responsibility and Work Opportunity Act. How did block granting welfare and adding a work requirement turn out, Bill?
Fifteen years after President Clinton joined with congressional Republicans and affixed his signature to a law that “ended welfare as we know it” -- imposing a five-year time limit on federal cash assistance for poor families, while allowing states to set shorter limits -- the social safety net is failing to keep pace with the needs of struggling Americans, many experts say. Millions of single mothers are falling through the cracks, scrambling to support their families with neither paychecks nor government aid.You could have not done that either. What an idea! And while you're at it, you could have also not escalated the drug war and basically created an underclass of predominantly African American men locked out of employment and federal aid because of non-violent crimes.
Since the beginning of the recession in late 2007, the nation’s unemployment rate has increased by 88 percent, while welfare caseloads have grown just 14 percent, according to the Urban Institute report.
Experts say this disparity reflects the inadequacy of remaining welfare programs in the face of a veritable epidemic of joblessness. During a period of national distress, fewer and fewer people have been able to secure help to meet their basic needs, according to the report.
Between 2007 and 2010 -- just as the economy was contracting and joblessness was rising, generating greater demand for public assistance -- welfare caseloads dropped in 13 states, according to the Urban Institute report. In Arizona, which faced a particularly powerful blow to its finances in the form of a sustained plunge in housing prices, the welfare caseload dropped by 48 percent during that timeframe.
The share of people who both live in poverty with no reported income and lack welfare assistance has changed significantly since welfare reform. In 1996, 1 in 8 single mothers fit this profile, according to Zedlewski. By 2008, the most recent year for which this data is available, that figure had climbed to 1 in 5, she said.
In the early days after welfare reform, many states enacted stricter time limits, Arizona included, and beefed up programs offering subsidized child care -- a crucial component for single mothers required to work. The budget crisis assailing states has prompted many states to effectively roll back these programs.
States around the country are slashing cash benefits, reducing time limits and, in some cases, imposing strict work requirements on welfare applicants, said LaDonna Pavetti, an expert on welfare who works at the Center on Budget and Policy Priorities. The practices also make it very hard for parents already dealing with a job crisis, a disability or other complications to qualify for cash aid, she said.
In 1997, the first year the reforms took effect in most states, Georgia used 73 percent of its federal welfare block grant to provide cash aid to poor families, according to data the state reported to the federal government. By 2009, the most recent year for which complete data is available, Georgia spent just 11 percent of its block grant on cash aid. Spending in Florida, Texas and Arizona plunged by similar margins.
The impact of these cuts is easy to discern: Far fewer poor families are being given cash assistance. In 2009, Georgia and Texas each provided cash aid to less than 10 percent of poor families, according to the Urban Institute report.
Bill, you also said at the Fiscal Summit that your repeal of Glass-Steagall had nothing to do with the financial crisis.
However, the Nobel Prize-winning economist who once chaired your Council of Economic Advisers, Joe Stigitz, begs to differ:
The next issue that came very much to the fore was the issue of repealed Glass-Steagall Act While I was chairman of the Council of Economic Advisers, that didn't go through. It happened after I left. I opposed it very strongly. I thought there were good reasons why we had passed Glass-Steagall in the aftermath of the Great Depression. You look at the history, and it was clear that the quarter century after World War II, in which we had strong financial market regulations, is that one quarter century in the world in which there was almost no financial crises, no banking crises. It was also the period of most rapid economic growth, and it was also the period in which the inequalities in our societies were being reduced. So it was very hard to say that these regulations had stifled economic growth.You could have not pushed for and signed the Graham-Leach-Bliley Act, Bill, That wouldn't have done wonders for addressing inequality, but it would have not made the problem worse.
But there were two other problems. One of them is that by breaking down these barriers, we would wind up with larger financial institutions that would reduce competition, increase the risk of too big to fail. Banks that are too big to fail have incentives to engage in excessive risk taking. And that's exactly what happened. The increase in the concentration in the banking system in the years after the repeal of Glass-Steagall has been enormous, and we've seen the excessive risk taking, which American taxpayers have had to pay hundreds of billions of dollars for.
And the third factor that I think was not fully appreciated at the time, but clearly is evident since, was that the culture of these two kinds of institutions is and ought to be very different. Investment banks take rich people's money and are exposed to undertake risk, which is appropriate to those seeking high returns but can bear the high risk. ... The basic commercial banks are supposed to provide finance to small and medium-sized enterprises. They are an essential part of the lifeblood of an economy. That kind of banking is supposed to be boring; it's supposed to be conservative; it's supposed to do the job of assessing risk and making sure capital goes to where it's supposed to go. ...When you put them together, unfortunately what happened is the high-stakes, high-return culture of the investment banks dominated. And so what happened is the commercial banks, which had the security of deposit insurance, the backing of the U.S. government, in effect, dominated. And we wound up having to pay, as I said, hundreds of billions of dollars to rescue these commercial banks that engaged in excessive risk taking.
Do you know what else you could have not done, Bill? You could have not lowered the capital gains tax from 28% to 20%. That would have been grand, Bill.